Favourable Expatriate Taxation in Denmark

If you’re interested in taking a short term overseas contract to sample life in another country then you might like to consider Denmark as it has favourable expatriate taxation rules.

Depending on the nature of the contract you undertake you could remain in Denmark as an expatriate for up to three years and only be subject to minimal taxation on any income, bonuses or allowances you get.

It’s now incredibly simple for residents of one EU country to move to another, take up residence and begin employment; so with the added bonus that expatriates need only pay 25% tax on their entire Denmark earned income, Denmark has to be one of the most attractive EU destinations to relocate to!

The terms under which an individual can register as liable for the special expatriate taxation rates are: -

1) The expatriate must of course become officially resident in Denmark to be eligible for the special taxation status.

2) It is usual for the expatriate’s temporary qualifying contract to begin at the same time as the application for residence.

3) The expatriate should be new to Denmark, i.e., the expatriate should not have been resident in Demark for the three years prior to the application for expatriate taxation status.

4) To be granted the special tax status the individual has to first register for full tax liability...therefore if you’re hoping to be granted the status it is wise to have your contract checked out by local tax authorities for compliance before registering in case it does not comply will all the rules as you will suffer full taxation otherwise!

5) The contract cannot be granted by a company that the expatriate has been an owner or co-owner of in the past five years.

6) The duration of the contract must be for a minimum of six months and a maximum of three years over a period of ten years although there is a possibility the contract can be extended by four years during which period the expatriate will become liable for full Danish taxation.  So in total the ‘temporary’ contract can be for a period of seven years, three of which can be enjoyed at the favourable taxation rate of 25%

Other potential benefits of taking up temporary residence and employment in Denmark include the fact that there are ways around having to pay into the social security system in the country and also if you retain your primary residence elsewhere and a member of your family continues to reside in that home you can benefit from certain allowances granted to those who have to maintain two homes.

To find out more about working in Denmark and in particular the favourable expatriate taxation regime in Denmark check out http://www.workindenmark.dk/

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